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Chinese Yuan Slumps As Industrial Output, Retail Sales Crash in COVID-19 Fallout

March 16, 2020 at 14:33 by Andrew Moran

Hundred US dollar bill vs. Hundred Chinese yuan billThe Chinese yuan is slumping against multiple currencies to kick off the trading week, driven by a crash in key economic metrics. With a myriad of January-to-February reports coming in, global financial markets are gaining insight into just how much the coronavirus damaged the world’s second-largest economy. Despite Beijing in the beginning stages of rebooting its economy, it is unclear how long it will take for China to return to full capacity.

According to the National Bureau of Statistics (NBS), industrial production plunged 13.5% in January and February. The market had anticipated gain of 1.5%. The Covid-19 pandemic resulted in business disruptions and travel restrictions, causing historic collapses in all industries: transportation equipment (-28.2%), textiles (-27.2%), machinery (-24.7), chemical (-12.3%), and power equipment (-7.3%). Industrial exports plunged 30%.

During this same period, retail sales cratered 20.5%. Analysts had penciled in a gain of 0.8%. All sectors witnessed decline: apparel (-30.9%), cosmetics (-14.1%), office supplies (-8.9%), automobiles (-37%), building materials (-30.5%), and furniture (-33.5%).

Fixed-asset investment plummeted 24.5%, down from the 5.4% advance in December. Experts had penciled in an increase of 2.5%.

Housing prices came in better than expected with a 5.8% jump, compared to the 5.5% estimate. In December, the housing price index climbed 6.3%.

Later this week, industrial profits will be reported. On Monday, the manufacturing and non-manufacturing purchasing managers’ index (PMI) will be published for March. They are both projected to remain in contraction territory.

The real devastating measurement has been the virus outbreak’s impact on the labor market. The NBS said that approximately five million people lost their jobs in the first two months of 2020 with the unemployment rate surging from 5.2% in December to 6.2% in February. The consensus is that more job losses are coming since just the resumption rate for small- and medium-sized companies hovers at just 60%.

Overall, all these numbers indicate subzero gross domestic product in the first quarter. This would be the first quarterly contraction since 1989.

The USD/CNY currency pair rose 0.12% to 7.0166, from an opening of 7.0082, at 14:28 GMT on Monday. The EUR/CNY advanced 0.4% to 7.8123, from an opening of 7.7816.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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